Radical changes to the state pension: Five vital facts you need to know

We'll be in our 70s before we can enjoy a decent pension, says a new report

Published:13:51Thursday 25 February 2016

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The state pension will undergo radical changes on April 24 and understandably there are many questions being asked. Here are five important facts:

The new system doesn’t apply to everyone

The new system only applies to those newly qualifying for the state pension - i.e. if you reach state pension age before April 6 2016 the changes will not apply to you. For them, the basic state pension is worth £119.30 a week for a single person in 2016/17 (plus any additional pension built up via SERPS - State Earnings Related Pension Scheme - or Sp2, the state second pension).

You may not get the full amount

The ‘starting amount’ for the new state pension is £155.65. However, while those who have built up a certain amount of additional state pension may get a higher amount, those who were contracted out before April 6 2016 will probably get less. Basically, you’ll get whichever is the greater of the amount you would get under the old system, or the amount you would get if the new system had been in place over the whole of your working life.

Deferring your pension isn’t a great option any more

While you can still put off taking your state pension, there will be less benefit in doing so. At the moment, for every five weeks you defer, your pension will increase by 1% - 10.4% for every full year. However, for those qualifying for the state pension on or after 6 April 2016, the rate of annual increase will drop substantially, from 10.4 per cent to 5.8 per cent.

You’ll need more National Insurance qualifying years

Currently, your state pension is calculated pro rata based on how many National Insurance qualifying years you have. If you have less than ten years, you’re unlikely to qualify for any state pension under the new system (one exception being some women who paid married women and widow’s reduced-rate National Insurance contributions under the old system).

Less people will be able to inherit their partner’s pension

As the new state pension is based on your own National Insurance contributions, you won’t benefit from contributions made by your spouse - unlike the current system which allows some people to claim a state pension based on their husband, wife or civil partner’s NI contributions. However, if your marriage / civil partnership started before 6 April 2016, and your partner either reached state pension age or died before 6 April 2016 you may be able to claim.

You can find out more about how the new state pension is calculated here